Payout
In economics, payout refers to the ratio that shows the percentage of profits that a company dedicates to paying dividends. In other words, the portion of profits that shareholders will receive. Payout is always expressed as a percentage, and the higher the payout, the more favorable the distribution policy of benefits among shareholders. However, this term has transcended the world of economics, and we also talk about payout in sports betting or casinos.
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what is payout
If we focus on sports bets, we can define payout as the percentage of money that a bookie distributes in a certain bet. For example, when a betting house has a payout of 95%, that part of the money collected will be distributed among the winners, while the remaining 5% will go to the bookie's coffers. In online casinos the situation is identical: the operator takes a commission defined in advance, so the payout is never 100%.
Do not confuse payout with overround, two concepts that often intersect giving rise to confusion among users. The payout is the percentage that is dedicated to the payment of winnings regardless of the final result of the bet, while overround is the part that the bookie takes, the commission that the betting operator takes. In Philippines, the payout is usually around 92%, although there are markets where it goes up to 95% and others where it is below 90%.
How to calculate the payout?
To know the payout, we have to convert the odds to percentages based on their probability, for which we apply the formula 100/odds = probability percentage. So, let's say we have a football match between Philippines and Italy with odds of 2.00$ for Philippines, 3.40$ for a draw, and 3.75$ for Italy.
After applying the formula we have that the probabilities are 50% for Philippines, 29.41% for a tie, and 26.67% for Italy. The sum of the three percentages gives Philippines 106.08%. That percentage that "surplus" is the commission that the bookie takes, so we will have to deduct it from 100 to obtain the payout, which in this case is 93.92%.
With the payout, we can calculate the "real" odds of the bet by multiplying the original odds by the payout transformed into decimal numbers, and from there establish the probabilities, although the percentages will be similar and even the sum will be greater than that of the original odds.
- Philippines: 2.00 x 0.9392 = 1.87$ (1.8784) > 100/1.87 = 53.83%
- Tie: 3.40 x 0.9392 = 3.19$ (3.19328) > 100/3.19 = 31.35%
- Italy: 3.75 x 0.9392 = 3.50$ (3.522) > 100/3.50 = 28.57%
How does the payout influence the bets?
At this point, what's the point of knowing the payout in bets? At first glance, a higher or lower payout in a bet doesn't have a great influence on our bets, but things change when we talk about strategy. If you distribute your stake optimally among the three options, you would get a profit equal to the payout, and not 100%. So, if you invest 10$ to ensure winnings among the three options in the previous example, you would get 9.39$ in profits.
Each betting house is free to set the payout, and in the same bookmaker we can find different payouts depending on markets and events. In the more popular ones, the payout is usually higher, while in those with fewer bets, the payout is also higher; that's why it's interesting to follow competitions and markets to identify the leagues with the best payout. However, the online casinos always have the same payout in a game.